By Rachel Greenwald
In the spirit of investigative reporting, NPR correspondent Pam Flesser applied for an online payday loan on an advertized lending site, etaxloan.com. Despite filling out the application with a fake name, social security number, address, and fake bank account information, Pam immediately received a message stating that she had been pre-approved for a loan up to $750.
As it turns out, etaxloan.com is not a lender but a lead generator, a middle-man who collects sensitive information from loan seekers and charges a fee to lenders who want to access this information and attract this pool of potential borrowers. The market for these type of loans is huge –an estimated 12 million Americans take out paydays loan each year, generating $7.4 billion annually for this industry – and while many states like New York have enforced stricter regulation at the state-level on brick-and-mortar payday lenders, it remains difficult to impose restrictions on online lenders across state lines.
Though Pam did not take the loan, she received dozens of phone calls over the following months, some from companies offering a loan 10x what she requested and others from companies that were not even connected to etaxloan.com. As Benjamin Lawsky, the Superintendent of financial services for New York State, explains in the article, “Once you made that application, you basically sent up a red flag with them that you are someone in need of this money, and you need it on a short-term basis. That’s when the vultures come out.”
At Accion East, we never share unauthorized information with third parties, and our applicants work one-on-one with their personal Loan Consultant through the entire application and loan process. Because our Loan Consultants are attentive and responsive, our clients receive tailored financial education and the tools they need to reach their fullest potential as entrepreneurs: personalized credit coaching, business planning assistance, and access to networking opportunities.
For many of the entrepreneurs we work with, limited credit prevents them from obtaining financing from traditional lenders like banks. Because Accion East reports to the three major credit bureaus, Equifax, Experian, and TransUnion, our loans enable clients to establish and build their credit as they build their business so that they may one day qualify for loans from the traditional lenders that may have previously denied them.
If you’re interested in learning more about financing for your small business, contact Accion East today.